I am a 24 (almost 25) AGR E-6. 6 years total in the Army. Around 4 AFS, 2 TPU. I have no debt and I am just trying to figure out what to do to set myself up for the future. I wanted to buy a house but I’m currently in California so I can’t afford a house. I have considered commissioning but I’m worried if I get out of AGR I won’t be able to get back in as an Officer. Any recommendations that would help me lead to financial freedom? I am considering staying till retirement where I can have an Active Duty Retirement at 40, but I’m not super fulfilled or happy in my current position.
Is the ROTH TSP different from a ROTH IRA?
byu/CrowPsychological730 inMilitaryFinance
Posted by CrowPsychological730
5 Comments
A lot of stuff in your post that is irrelevant to the question. Yes a Roth tsp is different from a Roth IRA. You can contribute to both for a total of 30k in those two tax advantaged accounts.
None of your post really pertains to your title question.
No. Roth TSP is not the sane as IRA. Some similar factors. Primary after tax savings with tax free withdraws. Assuming you are blended retirement you shoukd be contributing to TSP at a minimum to get the match.
TSP offers legal protections from bring legal claims, bankruptcy, etc that the IRA may not based on state laws.
Good luck.
Tsp = 401k which is a different type of retirement account compared to an IRA. TSP/401K/403B money has to come directly from your employer through your paycheck and has a $23,000 annual contribution (can be much higher depending on a lot of factors) an IRA can be money from anywhere you directly contribute and for 2024 has a limit of $7,000. Both are offered in traditional(money isn’t taxed until withdrawal so growth is taxed), and a Roth is taxable at contribution(meaning you do not lower your current tax rate with contributions but growth isn’t taxed).
You should use both, the IRA is more pressing because it is easier to max. But you should try contributing at least 15% to your TSP if not try maxing it.
Yep. Two different pots you can put money in with similar tax treatments is all. One is inside TSP and the other is an IRA that you need to establish somewhere like vanguard or fidelity. Do both.
Let me split it up a bit differently than other explainers so it may be easier to follow:
TSP and IRA are types of *accounts.*
Roth and Traditional are types of *contributions*.
You can make either type of contribution to either account.
TSP is just the government version of a 401(k) account. In this account the investments you have available are determined by your employer; you can pick the funds in the TSP for your money, but can’t pick individual stocks. AFAIK the money must also be deducted directly from your paycheck; you cannot just show up with a pile of cash to put into your TSP. The contribution limit this year is $23,000.
IRA is another retirement account, but one you have a lot more control over. You can do it with whatever company you want, and can pick individual stocks, ETFs, etc. within it. You *can* just deposit the yearly max at the earliest possible date if you want to. The contribution limit for this year is $7,000.
Traditional contributions reduce your taxable income by the amount of the contribution. If you’re doing Traaditional TSP contributions, this will decrease the amount of your taxable base pay on each paycheck. If you’re doing Traditional IRA contributions this will be accounted for when you file your taxes. When you withdraw later (ie, in retirement), the gains on Traditional principal balances will be taxed as income at that time.
Roth contributions are post-tax. You get paid and taxed, then they go in. Gains on Roth principal balances are tax-free forever (barring any penalties for early withdrawal).
That said, none of your questions really had anything to do with that…